By Jeff Cioletti
In a year full of pivots, the latest was the transition to a virtual event for the annual American Craft Spirits Association (ACSA) and Distilled Spirits Council of the U.S. (DISCUS) Public Policy Conference, which kicked off today. And though the COVID-19 pandemic has made it impossible for participants to gather and meet with their U.S. Representatives and Senators in person, the online format carried one great benefit: it enabled a record number of attendees to virtually converge on the nation’s capital to advocate for the industry’s greatest priorities. More than 300 distillers, trading partners and industry allies from 45 states logged in for day one of the two-day event at a time when it’s more critical than ever that the spirits industry’s voices be heard on Capitol Hill.
Three key issues are taking center stage at the 2020 Public Policy Conference: permanent federal excise tax (FET) relief, trade tariffs and the impending update of the Dietary Guidelines for Americans, issued by the U.S. Departments of Agriculture (USDA) and Health and Human Services (HHS).
FET Relief
The temporary reduction of the FET is set to expire on December 31, 2020, if Congress takes no further action. Initial temporary FET relief became law on January 1, 2018, when the federal tax was reduced from $13.50 to $2.70 per proof gallon on the first 100,000 gallons. The reduction passed as part of the broader Tax Cut and Jobs Act of 2017 and was originally set to expire on December 31, 2019. Following the continuous efforts of ACSA and DISCUS, Congress last December passed a one-year extension on the reduced tax rate, which will expire just three and a half months from now. The spirits industry’s main objective is to make the $2.70-per-gallon rate permanent, by convincing Congress to pass the bi-partisan Craft Beverage Modernization and Tax Reform ACT (CBMTRA). Senators Ron Wyden (D-OR) and Roy Blunt (R-MO) introduced the Senate version, S.362, which has the support of 74 Senators at last count. Representatives Ron Kind (D-WI) and Mike Kelly (R-WI) are behind the House version, HR 1175, and have also gained the support of three-quarters of the House.
Wyden, who addressed Public Policy Conference attendees via Zoom, touted the bi-partisan nature of the bill, especially at a time of intense partisan polarization. “I think if you were going to order a 7Up on the floor of the Senate, you couldn’t get that many Senators to go along with it,” Wyden joked.
Wyden noted that FET relief permanence has always been his objective and that he won’t stop pushing for it until that goal is achieved. “I want everyone in this group to know how much I appreciate the working relationship we’ve had with all of you and I want you to know that we’re going to go the distance until we achieve what we set out to do years ago…The permanent legislation we’re talking about today is more important during the COVID pandemic [and] during the monstrous forest fires that we’ve seen in my part of the country that have taken such a toll on the West…Today’s discussion is not an ended discussion, it’s a to-be-continued discussion until there is a bill signed into law that makes it permanent and you have the certainty and predictability you need to grow your business.”
Senator Blunt offered his own remarks to the online audience via a pre-recorded video. Blunt hailed the efforts of craft spirits producers that stepped up this year to produce hand sanitizer when their communities so desperately needed it—even as distilleries themselves were severely impacted by the pandemic. “But the distilleries pivoted to step up to the plate,” Blunt said. “You answered the call to help when it was needed, even when you faced your own crises of closures of tasting rooms, bars and restaurants…As we navigate the economic crisis brought on by the pandemic, you shouldn’t have to worry if those decreases turn to significant increases in your excise tax in January of next year. Your ability to grow and compete shouldn’t be hindered by burdensome taxes.”
ACSA Public Policy Adviser Jim Hyland noted that the industry should get Congress to act on FET reform sooner rather than later. “This is an incredibly well-timed virtual fly-in for us because some of these [sorts of] decisions are being made right now,” Hyland said. “We would love to get it done now so we’re not sitting on pins and needles in December, wondering whether it will be extended…It’s a great time to say 'now’s the time, let’s get this done.'”
Trade Tariffs
The trade tariffs and retaliatory tariffs that have been enacted in the past two-plus years put a major burden on the industry before the coronavirus and spirits producers’ losses in revenue during the COVID-19 pandemic have only compounded the problem. The trade crisis began in June 2018 when the European Union imposed a 25% tariff on American whiskey in response to tariffs that the U.S. put on steel and aluminum imports. If no action is taken, that tariff will increase to 50%. The existing tariff has already reduced American whiskey exports to the EU by 39%. Since last October, the U.S. has imposed a 25% tariff on single malt Scotch whisky, Irish whiskey from Northern Ireland and certain liqueurs/cordials. Additionally, the EU has included U.S. vodka, rum and brandy on its proposed list of tariffs. The spirits industry is calling on members of Congress to call or write to U.S. Trade Representative Robert Lighthizer to urge him to negotiate an agreement with the EU and the United Kingdom securing the simultaneous removal of the 25% tariff on American whiskey and U.S. tariffs on EU and UK beverage alcohol products.
Dietary Guidelines for Americans
The newest issue the spirits industry is discussing with U.S. Senators and Representatives is a proposal to change the longstanding definition of moderate drinking contained in the U.S. Dietary Guidelines for Americans, noted DISCUS chief of public policy Christine LoCascio.
Since USDA and HHS issued the first Dietary Guidelines for Americans (DGA) in 1980, the federal government has advised adults who choose to consume alcohol to do so in moderation. Since 1990, the government has defined moderation as no more than one serving per day of spirits, beer or wine for women and no more than two servings per day for men. The federal agencies update the DGA every five years and after an 18-month review process will be doing so at the end of 2020—with a proposed change that would cut the recommended limit for men in half, putting it on par with one-drink-per-day recommendation for women.
“The flawed proposal is gaining media attention,” said LoCascio. “One thing you should know is that the beer, wine and spirits industries are united in our opposition to this proposal because the science does not support this change.”
Scientists, including some who were involved in earlier DGA updates, have voiced their opposition to this. Five professors from Harvard, including professor of medicine Dr. Eric Rimm, as well as H. Westley Clark, MD, professor of public health at Santa Clara University; Dr. Curtis Ellison of Boston University School of Medicine and Dr. Craig McClain, Associate Vice President of Health Affairs at the University of Louisville are among those who oppose the proposed change.
“Urge [Congress] to ask USDA and HHS to review this is as soon as possible,” LoCascio added.
Share Your Stories
Earlier in the day, DISCUS president and CEO Chris Swonger emphasized the importance of spirits producers telling their stories in their efforts to get Congress to act on the issues that are most important to the industry.
“As we’ve said in the past, your stories, the challenges that you all have had to navigate through the pandemic are going to be essential elements…to get all members of Congress to push through the great political divide that exists in our country and push really hard to get this passed before year’s end,” Swonger said. “Your stories, your efforts and advocacy are going to be very important for all of us.”
ACSA CEO Margie Lehrman noted that collective efforts have enabled people to overcome seemingly insurmountable obstacles throughout human history. “Think about how [the Pyramids of Egypt] were built,” Lehrman said. “In short, there were massive numbers of men—20,000—who used limited technology to complete a task, a grand task.”
Then, she points to a modern-day scenario found in the writing of management guru Jim Collins, author of “Good to Great.”
“There’s no single defining action, no grand program, no single killer innovation, no solitary lucky break, no miracle moment,” Lehrman continued. “Rather, it feels like turning a giant, heavy flywheel. Pushing with great effort, you get the flywheel to inch forward…Then at some point, breakthrough! The flywheel flies forward with unstoppable momentum. The common factor between the Pyramids and moving the flywheel is you. Stones moved, business develops and Congress will act through combined, concentrated efforts.”
The Public Policy Conference continues tomorrow with virtual visits to distillers’ respective members of Congress and a closing toast.
ACSA and DISCUS would like to extend special thanks to Five x 5 Solutions and the Wine and Spirits Shippers Association for sponsoring the Public Policy Conference.
